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-- Jack (jsprat@eld.~net), November 27, 1999

Answers

In an inflationary depression, where would our best investments lie?

-- Just Wondering (Just@wondering.com), November 27, 1999.

Sources of inflation, post Y2K:

1. US government runs the printing presses to boil off some of the debt, both public and private, which would otherwise sink banks. Cheered by the working middle class, in horrible debt on houses, credit cards, etc. Booed by retirees. Who has more votes?

2. US government tries to "stimulate" their way out of the Y2K recession, fight deflation. Thinking they've learned a lesson from the failure of Japanese policy, which did not inflate.

3. Drop in the dollar, as it is realized that we cannot support our current trade deficit any longer, and that all the stock bought by foreign investors is now worth a lot less.

But is gold the right hedge?

I also wonder about housing. Logic says that it should deflate (as it did in Japan) to correct previous runups, and because a soft economy means many people can no longer afford their houses. So I would wait and buy at foreclosure. On the other hand, if the economy is a mess, a mortgage will be hard to come by next year. And if inflation is in the cards, interest rates will jump.

What to do, what to do ???

-- You Know... (notme@nothere.junk), November 28, 1999.